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CRTC supports choice of Internet services

Independent ISPs to have flexibility to offer competitive retail services without capping bandwidth

OTTAWA-GATINEAU, November 15, 2011 — Today, the Canadian Radio-television and Telecommunications Commission (CRTC) introduced a new way for large telephone and cable companies to charge independent Internet service providers (ISPs) for the use of their networks. This wholesale billing model, which is based on capacity, will give independent ISPs added flexibility in offering competitive and innovative services to Canadians.

The CRTC does not regulate rates or set bandwidth caps for retail Internet customers. To encourage greater competition, the CRTC requires that large telephone and cable companies sell access to their networks to independent ISPs, under specific terms and conditions. Canadians can then choose between multiple ISPs.

Under the CRTC’s new capacity-based approach, large telephone and cable companies will sell wholesale bandwidth to independent ISPs on a monthly basis. Independent ISPs will have to determine in advance the amount they need to serve their retail customers and then manage network capacity until they are able to purchase more. Alternatively, large companies can continue to charge independent ISPs a flat monthly fee for wholesale access, regardless of how much bandwidth their customers use. Both billing options give independent ISPs the ability to design service plans and charge their own customers as they see fit.

“Our aim is to foster a marketplace in which Canadians have as many options as possible for their Internet services,” said Konrad von Finckenstein, Q.C., Chairman of the CRTC. “Independent ISPs provide an alternative to the large telephone and cable companies, but must rely on these same companies for certain elements of their network. Under the capacity-based model announced today, they will have to forecast their usage and plan accordingly.”

The same requirements will now apply to all large telephone and cable companies, ensuring that independent ISPs can choose between different wholesale providers under similar terms.

The rates approved by the CRTC will allow the large companies to recover their costs and provide them with incentives to continue investing in their networks to meet future increases in Internet traffic.

In addition, the CRTC approved a flat-rate only model for wholesale business services.

In the late 1990s, the Canadian Radio-television and Telecommunications Commission (CRTC) decided not to regulate dial-up Internet services because there was enough competition to give Canadians choice. Internet service providers (ISPs) set the rates paid by consumers, as well as other terms and conditions, without having to obtain the CRTC’s approval.

With the introduction of high-speed Internet services, the CRTC ordered large telephone and cable companies to sell access to their networks to independent ISPs on a wholesale basis. Independent ISPs use these services to offer Internet and other services to their own retail customers. This decision was taken to encourage further competition and to provide choices to Canadians.

In 2009, the Bell companies applied for permission to change their wholesale billing model, which would have resulted in additional charges for independent ISPs when their individual retail customers exceed monthly download caps. The Bell companies wanted to adopt usage-based billing (UBB) to help manage the traffic on their networks. In addition, certain cable companies had already introduced this pricing model for their wholesale services. The CRTC approved the Bell companies’ request after a lengthy process.

In February 2011, the Commission launched a proceeding to review how large telephone and cable companies charge independent Internet service providers for the use of their networks. Concerns had been raised that applying UBB at the wholesale level would force independent ISPs to impose the same pricing model on their retail customers.

During its proceeding, the CRTC received over 2,600 comments from the public and held a public hearing in Gatineau, Que., in July 2011.

Acceptable billing models

The CRTC has selected two wholesale billing models that will give independent ISPs the flexibility to develop innovative business models. Moreover, the models do not contain any provisions that would require independent ISPs to impose bandwidth caps on their retail customers. The decision to impose such caps is left to the ISP and not mandated by the CRTC.

a) Capacity-based model

The first option is known as the capacity-based model, which contains three separate components:

a monthly access rate for each of the independent ISP’s retail customers

a monthly capacity charge, offered in increments of 100 megabits per second, and

any applicable ancillary charges, such a monthly interface charge and associated service charges.

This model allows large telephone and cable companies to charge separately for access and usage, but at the same time recognizes that independent ISPs are in the best position to forecast their needs. By determining in advance the bandwidth they need, independent ISPs assume the risk and responsibility associated with planning and managing the impact their customers will have on the large companies’ networks.

b) Flat-rate model

The second option is the existing flat-rate model, which contains two separate components:

a monthly access rate for each of the independent ISP’s retail customers, and

any applicable ancillary charges, such a monthly interface charge and associated service charges.

This model allows large telephone and cable companies to recover their costs by charging independent ISPs a flat monthly fee, regardless of how much bandwidth their customers use.